After a big correction in 2022, some EV stocks have witnessed a strong recovery in 2023. And I believe that in the next 12 to 24 months, there will be some top clear winners and losers in the EV segment. Amidst intensifying competition, several companies are likely to go bust or be acquired. This column focuses on the best EV stocks in July that look poised for a rally in the foreseeable future. Further, I believe that these EV stocks are likely to survive and grow through the decade.
Talking about the industry growth potential, 9% of new cars sold were electric in 2021. Last year, this number inched higher to 14%. The International Energy Agency expects that by 2030, 60% of new vehicles sold will be electric. Therefore, there is immense scope for growth and it’s still a good time to accumulate quality EV stocks. This column discusses seven EV stocks to buy in July.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) zoomed in the first half of 2023 from deeply oversold levels. However, on a 12-month basis, the stock is higher by just 21%. I believe that TSLA stock is poised for a further rally on positive business developments.
An obvious reason to be bullish is an attractive line-up of new models. This includes the Cybertruck, Roadster, and Tesla Semi. There also seems to be a lot of excitement around Tesla’s supercharger network. Some analysts believe that the business segment can potentially be worth $100 billion.
Tesla also has ambitious growth plans through 2030 with the company targeting to sell 20 million EVs annually. This would require Tesla to set up several gigafactory. India and Indonesia might be potential upcoming locations. From a financial perspective, Tesla reported cash and short-term investments of $22.3 billion as of Q1 2023. Last year, the company reported operating cash flow of $14.7 billion. Therefore, there is high financial flexibility to set up new factories and pursue aggressive R&D investments.
Li Auto (LI)
Li Auto (NASDAQ:LI) is among the best EV stocks to buy for multi-bagger returns. The stock has surged by 70% for the first half of 2023 and I expect the positive momentum to sustain. Given the margins and cash flows, Li Auto has a strong edge over Chinese peers like Nio (NYSE:NIO) and XPeng (NYSE:XPEV).
Li Auto has been registering stellar delivery growth numbers. For Q2 2023, deliveries increased by 201.6% on a year-on-year basis to 86,533. In the first half of 2023, the company has already surpassed the total deliveries for 2022. The launch of multiple new models coupled with an aggressive expansion in the retail network has been the growth catalyst.
It’s also worth noting that Li reported a vehicle margin of 19.8% for Q1 2023. Healthy margins have translated into a free cash flow of $975.9 million for the quarter. With a strong cash buffer and swelling cash flows, financial flexibility is high for investment in innovation and retail expansion.
Albemarle (ALB)
Lithium producers have warned that lithium supply is unlikely to be enough to meet the growing demand for EVs. Lithium is therefore an attractive investment theme. Albemarle Corporation (NYSE:ALB) is among the EV stocks to buy at undervalued levels. At a forward P/E of 9.9, the lithium producer is poised to double in quick time. The long-term outlook is also promising.
Albemarle has been on a high-growth trajectory. Even with lithium prices correcting from highs, the company has guided for 35% to 55% revenue growth for the year. At the same time, cash flows are likely to remain robust, which will support capital investment.
With capacity expansion, Albemarle has guided for 20% to 30% growth in annual lithium sales volume through 2027. Once lithium prices start trending higher, cash flows will swell significantly through capacity addition and higher price realization. ALB stock is therefore a quality dividend growth stock to consider besides the capital gains potential.
Panasonic (PCRFY)
Panasonic (OTCMKTS:PCRFY) is among the best EV stocks in July considering the valuation and long-term outlook. PCRFY stock has surged by almost 50% in the first half of 2023. However, the 1.74% dividend yield stock remains undervalued at a forward P/E of 11.3.
I believe that PCRFY stock is trending higher for two reasons. First, the company is on an aggressive expansion spree. A second battery plant in the U.S. is under construction with another being planned in Oklahoma. The company is also looking to build an EV battery plant in Japan in collaboration with Toyota Motors (NYSE:TM).
Further, Panasonic has been investing in innovation and I believe that the company is poised to gain market share. As an example, the company has 445 patents in the solid-state battery space. The company is also targeting a 20% jump in battery energy density by 2030.
ChargePoint (CHPT)
With rising EV adoption, it’s estimated that the number of charging stations in the U.S. will quadruple by 2025. It’s further expected to grow eightfold by 2030 to meet the rising demand. Similarly, Europe would need $134 billion in infrastructure investment by 2035 to meet the EV charging demand.
In a nutshell, EV charging infrastructure companies are still at an early growth stage. ChargePoint (NYSE:CHPT) stock looks attractive after consolidation in the first half of 2023. A breakout on the upside seems imminent after the sell-off in 2022.
For Q1 2024, ChargePoint reported 59% year-on-year growth in revenue to $130 million. An important point to note is that gross margin improved to 23% and I expect margin improvement to sustain. The key reason is recurring revenue growth as the number of installed charging stations increase.
It’s worth noting that the company is a leader in North America and is already present in 16 European countries. With a wide addressable market, the revenue momentum is likely to sustain in the next few years.
Solid Power (SLDP)
The solid-state battery is another segment that holds immense promise. Among the emerging companies, Solid Power (NASDAQ:SLDP) can be considered for accumulation. If the company can commercialize solid-state batteries, 10x or 20x returns would not be a big surprise.
One reason to be bullish is the backing of strong automotive partners like Ford (NYSE:F) and BMW (OTCMKTS:BMWYY). As a matter of fact, the company has licensed its cell design and manufacturing process to BMW. This will help in the acceleration of research and development. Strong automotive partners also imply minimal financial concerns as Solid Power continues to invest in R&D.
Solid Power also expects to deliver EV cells to automotive partners for validation testing. This is an impending catalyst for stock upside. It’s worth noting that even if developments are positive, commercialization is unlikely before 2026. SLDP stock is however attractive at current levels and some exposure to this high-risk name can be considered.
Polestar Automotive (PSNY)
Besides Solid Power, another penny EV stock to buy is Polestar Automotive (NASDAQ:PSNY). After a correction of almost 60% in the last 12 months, PSNY stock looks undervalued.
It’s worth noting that Polestar disappointed investors with a revised delivery growth guidance for 2023. However, this factor is discounted in the current price. I believe that Polestar is poised for robust delivery growth in 2024 and 2025.
One reason to be bullish is the point that the company is targeting the commencement of deliveries for Polestar 4 and Polestar 5 in Q1 2024. If macroeconomic conditions are favorable, delivery growth will accelerate. Polestar has also been pursuing cost-cutting. It’s likely that EBITDA losses will narrow in the coming quarters. While Polestar would require a fresh infusion of funds, I don’t see that as a concern. The company is still at an early growth stage.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
